Related Videos

Last Friday, the federal government gave the gift of Nexen to China. To be sure, Nexen’s shareholders also cashed in. But for Canadians this was essentially a gift to the Chinese National Offshore Oil Company (CNOOC) and the Chinese Communist elite.

Under the Investment Canada Act, the federal government approved Nexen’s takeover in a situation a Canadian company would not be able to buy equivalent assets in China. As a result, Chinese ownership in Canada leapt from $11 billion to $26 billion.

In return, CNOOC made promises to the government under the Investment Canada Act. These promises are not public. It is doubtful they will be any more enforceable than those given by U.S. Steel, for example, when it bought Stelco in 2007.

As Hamilton knows, U.S. Steel broke its promises, choosing Buy America over its commitments to Canada. Stelco was gutted. For a while, the Harper government played tough with

U.S. Steel. But, after the 2011 election, the government dropped enforcement actions against the company in a settlement.

Along with its approval of the Nexen deal, the government announced “tough” new guidelines on takeovers of Canadian companies by state-owned entities (SOEs). But on closer examination, the guidelines are not tough at all. They do only two things of importance.

First, the government will continue, under the Investment Canada Act, to negotiate commitments from foreign SOEs seeking to buy Canadian companies worth

$330 million or more.

Second, the government announced restrictions on future takeovers by SOEs in the oilsands. While takeovers were not ruled out in that sector, says the government, they will be rare after Nexen.

Yet this implies that takeovers by Chinese SOEs in every other sector of the economy are still on. Judging by past behaviour of Chinese SOEs, this is not good news for Canadian workers and suppliers. To be fair, the government also said Friday it would monitor SOEs in Canada.

Frankly, these other elements look like a whitewash. The government has put on hold its red-light sale in the oilsands, but the rest of Canada remains open for purchase.

Indeed, the vital question was not addressed on Friday: Will the government ratify the Canada-China investment treaty (or FIPA)? If the government does not ratify the 31-year FIPA, then the approval of Nexen and the new guidelines are problematic, but not disastrous.

If the government ratifies the treaty, then this will give CNOOC and all other Chinese SOEs in Canada extremely powerful leverage against Canadians and their governments, in exchange for little on paper from China.

After Friday’s announcement, ratification of the FIPA will indicate the prime minister has given up Canada’s big chips — except for the oilsands — in our bargaining relationship with China. It would signal near-capitulation to China’s legal and economic demands.

Ultimately, the significance of the Nexen deal depends on what happens to the FIPA.

— Gus Van Harten is a professor at Osgoode Hall Law School of York University. Courtesy Troy Media, www.troymedia.com.

Poll

Did the feds make the right decision in approving CNOOC's Nexen takeover?

Reader's comments »

Early Christmas for Chinese government

Gus Van Harten, QMI Agency

First posted:
Monday, December 10, 2012 07:00 PM EST

Last Friday, the federal government gave the gift of Nexen to China. To be sure, Nexen’s shareholders also cashed in. But for Canadians this was essentially a gift to the Chinese National Offshore Oil Company (CNOOC) and the Chinese Communist elite.

Under the Investment Canada Act, the federal government approved Nexen’s takeover in a situation a Canadian company would not be able to buy equivalent assets in China. As a result, Chinese ownership in Canada leapt from $11 billion to $26 billion.